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Thursday, March 06, 2008

Cost Savings - Not the Driver for Warehouse Management Systems

Recently the Supply Chain Digest covered a number of the drivers that lead companies to implement new warehouse management systems.  Surprisingly one of the factors that typically does not drive a new implementation of a WMS system is a desire to bring costs down.

Warehouse management systems are often times implemented for other reasons and other problems that need solutions such as dealing with rapid company growth, replacing obsolete technology, reconfiguring business to meet new supply chain and logistics strategies, and even regulatory changes.

Reducing costs is a driver but it's definitely not the most significant driver that lead companies to choose a new warehouse management system.  Often times in fact cost savings are an unexpected side benefit to these implementations.  On the downside many companies walk into these projects with unrealistic concepts of what they need to achieve and often times they provide too few resources to deal with the changeover.  This can often tightly to scope creep or increased implementation costs.

That actually unfortunately makes common sense as a company that does something because they have to as opposed to a company that does something because they want to his likely making the change for some of the wrong reasons.  Over time they probably can work it out and benefit from the change, but embracing a project as opposed to paying lip service to it is rarely a good business strategy and hardly ever leads to the cost savings that could be achieved.

All too often these and other IT related projects are treated like red tape step children with a level of importance about a half step down from investigating medicare part d rates after retirement.  A company might spend hundreds of thousands of dollars, even millions but fail to staff the project for success.  This is rarely the way to invest in a new solution that will become the life blood of the company.